Hughes Satellite Sale Grounded

In a major policy reversal, the Clinton administration has rejected the export of a commercial communications satellite to China because of concerns the deal could leak valuable military information to Beijing, administration officials said Tuesday.

Although the decision to reject export of the Hughes Electronics satellite could be appealed, administration officials characterized the rejection as final and said the move signaled a new, tougher philosophy toward export of high technology to China.

"This was a decision on a (single) case," said a senior Commerce Department official who spoke Tuesday on condition of anonymity. "But we believe that the Asia Pacific Mobile Telecommunications deal could have been used as a model." Commerce supported the export deal but failed to convince a majority of other key government agencies to back it.

Commerce could appeal the rejection, which was made at the assistant secretary level, to the secretaries of State, Defense and Energy and the head of the Arms Control and Disarmament Agency. But such a move appears highly unlikely.

In fact, Commerce moved quickly to bring the export matter to a vote because it knew the State Department was opposing a separate license needed to allow the launch of the U.S.-made satellite into space on top of a Chinese rocket.

"It would surprise me if an agency that opposed it would change its mind," the Commerce official said.

"We'd been advised that there were concerns with those launch licenses at State and that there would not likely be an approval in the near future," the Commerce official said. "It doesn't make sense for Commerce to approve its licenses unless and until we had indication that State had approved launch licenses."

A senior administration official, also speaking on condition of anonymity, said the White House was allowing the export debate play itself out at the agency level without presidential interference.

When it became clear to Commerce, which generally takes a pro-export stance on these matters, that State was adamantly opposed, Commerce hastened a decision as a courtesy to Hughes.

"It's good government to provide a company with an answer, yes or no," the Commerce official said.

The rejection comes as a major blow to Hughes, a General Motors subsidiary whose satellite division is based in Southern California. It also could signal a chilling of economic ties between the United States and China. Secretary of State Madeleine Albright is to travel to China next week.

The Financial Times of London first reported the Clinton administration decision Monday. Accounts of the decision also appeared in Tuesday's editions of The Wall Street Journal and The New York Times.

The prospective buyer of the satellite was a Singapore-based consortium. The Pentagon and State Department, however, raised concerns that some of the consrtium's top officials were senior Chinese military officers.

At issue in the export license was whether, by exporting the communications satellite, China might somehow gain valuable technology with military applications, specifically technology relating to the intercepting and protecting of communications.

The issue in the launch license, which the State Department was poised to reject, was whether U.S. aerospace companies might provide China with assistance in making their commercial rockets more reliable that would be useful in improving ballistic missiles.

The vast and powerful U.S. aerospace industries counter that the key issue is the financial well-being of U.S. companies that provide thousands of jobs and billions of dollars in revenue.

As a result of the export rejection, the Asian consortium is now expected to go elsewhere - probably to Europe - in search of a commercial satellite. The satellite is to be used as part of a mobile telephone network over China and much of the rest of Asia.

The vote to reject the export took place in a closed meeting last week. Though the outcome was not made public, officials said the State Department and Pentagon were opposed.

Commerce argued that the export might actually enhance U.S. security by strengthening a satellite company that also does extensive classified work for the CIA and the Pentagon.

Written By John Diamond, Associated Press Writer